Wildfire cat bond sales top $5bn as insurers offload risk

Wildfire-linked catastrophe bond issuance has already climbed past $5 billion so far this year, putting it close to the full-year record set in 2025 as insurers use the market to pass more wildfire risk to capital markets. The move is adding to a broader expansion in insurance-linked securities, with the outstanding catastrophe bond market standing at about $65.6 billion by the end of the first half.

Wildfire remains a smaller slice of the market than hurricane risk, which is still the dominant catastrophe bond exposure, but recent issuance shows that the peril is becoming a more established part of property-cat structures. Market reporting for the second quarter showed that issuance was heavily concentrated in property-cat risks, with California earthquake and wildfire among the major peril groups covered, while Artemis’ deal directory included California wildfire transaction 123 Lights Re Ltd. (Series 2026-1) in the outstanding market by July.

The recent pace builds on last year’s surge. Search-derived reporting indicates that wildfire-linked issuance in 2025 reached a record level that was roughly double the prior year, while a 45% jump in overall new catastrophe bond issuance pushed the total outstanding market to an unprecedented $61 billion. The rise to about $65.6 billion by the end of the first half suggests that the market has continued to deepen as insurers add peak and secondary perils to capital-markets protection.

Recent deals show that wildfire risk is being written in several forms. The California FAIR Plan’s Golden Bear Re Ltd. Series 2026-2 issued $400 million of Class A notes on an indemnity, per-occurrence basis over a three-year term to the end of February 2029, and priced at a 9.5% spread after guidance was cut twice, from an initial 9.75%-10.75% range and then to 9.5%-9.75%. Pricing of that kind points to investor appetite even for specialist wildfire exposure.

Other transactions extended wildfire cover beyond single-peril California structures. Hippo’s Mountain Re Ltd. Series 2026-1 issued $100 million of Class A notes providing fully collateralised reinsurance on a per-occurrence, indemnity trigger basis through 7 June 2029, with wildfire added to the covered perils. USAA’s Residential Reinsurance 2026 Limited (Series 2026-1), reported at $825 million, also showed how large multi-peril issuance remains, including an aggregate Class 14 tranche attaching at $4.975 billion and exhausting at $5.975 billion, alongside a Florida occurrence tranche attaching at $1.1 billion and exhausting at $2.1 billion.

Sources: insurancejournal.com